(Steven) Hello, everyone.

Thanks for joining us on CFMW's
ongoing series on financial literacy.

Today, we're going to talk about taxes,

a favorite of subject
of everyone's, I'm sure.

Joining me is Bonnie Naccarato
Assistant Financial Planner

and self-proclaimed tax nerd
based in Kingston.

Thanks for helping us out, Bonnie.

(Bonnie) Absolutely,
happy to be here. Steven.

(Steven) It's November. Ugh.

I don't have to worry about taxes
until when end of April, right?

(Bonnie) Yeah, he deadline
is April 30th, 2022.

(Steven) But should we start
thinking before then

about what we need to do for taxes
in terms of, maybe, deductions

and things like that?

(Bonnie) Most definitely,
I think it's really important

to try to organize yourself
before year end.

'Year end' means December 31st, 2021.

There may be some things that you can do
to reduce your tax liability

or maybe understand
what your tax liability will look like.

So what balance will you have owing,
if any, and maybe

there's some proactive things you can do
before that deadline.

(Steven) Can you give us
a couple of examples of that?

(Bonnie) Yeah, absolutely.

So most members of the Canada Armed Forces
potentially will not have received

any C-E-R-B, CERB benefits

largely because they did not experience
any reduction in their work schedule

or even their income

because they are public service.

Canada Armed Forces typically
did not have any reduction.

However, where you might see
some reduction in income,

therefore applying for CERB benefits
is the CAF member's spouse

or even their dependent children.

Spouses, as we know, often relocate
with their CAF member husbands or wives

for that matter.

And therefore, sometimes
they're not able to maintain

a professional career or a job, 
maybe that they can relocate to.

So, often they'll have jobs that...

are subject to maybe
closures based on COVID.

So that's a lot of retail
small businesses,

maybe that they work for, et cetera,

so they may be eligible for CERB benefits

based on not being able
to work during COVID.

And what that means is,

they would have received CERB benefits
potentially throughout the year,

if not, maybe part of the year.

The downside of CERB benefits
is that it's not taxed at source.

So members or their dependents
and spouses do need to keep that in mind.

Maybe looking at...

how much CERB did you receive
by December 31st

or any part part of the year
and did you receive

any other employment income?

Because while service is paid untaxed,

your employer, if you did have 
some employment earnings,

would have taxed you at source.

However, from CRA's perspective,
Canada Revenue Agency,

they will require you to pay taxes
on the cumulative total.

So it's your total income
that you pay taxes on.

So hypothetically, if someone earned about
$20,000 in the year through employment

and they collected
maybe 10,000 of CERB benefits,

effectively, that makes
their income $30,000.

However, they only pay taxes on 20.

So it's important to take a look
and see what that tax liability is.

Perhaps an RSP contribution
could reduce that tax liability

or maybe have some savings set aside.

And if worst-case scenario,

nothing is set aside

and you just don't have the cash flow
for the RSP contribution,

you could certainly set up a payment plan
when you do file your taxes

with Canada Revenue Agency
to repay that balance owing.

But it's important to start now
so you are not surprised

come April 30th with that balance owing.

A few other things that some folks
can take a look at

is some of the work-from-home deductions.

Some of the work-from-home
deductions will vary

depending on your circumstances.

If you were required to work from home
based on COVID alone

more than 50% of the time,
you may be eligible to claim

the $2 a day flat rate without proving
any documentation

or having an employer sign off
on a document.

It is a flat rate so it may not factor in
some of the expenses

that you may have paid

but it will give you a $400 flat credit
that is deducted against your income.

For those that are working remotely
and maybe in their contract,

they are considered to be
a remote employee,

what they can look at
is a form called the T2200,

which is a condition of employment.

That document allows the employee
to deduct home office expenses,

and it's pretty, pretty rich in terms 
of the types of claims you can make

so you can deduct
the actual home office space,

what expenses you might have
in the home.

So electricity, internet, et cetera.

And that can be a pretty
significant deduction,

but it's important to understand that
there are two different deductions,

one is the work-from-home
that has a flat credit,

and the other is a T2200,
which is a conditions of employment.

I will make a note that in 2020,

most CAF personnel that worked from home
were able to claim the deduction,

including those that were posted out can.

I am not certain that that
will also be the case for 2021,

but I think it's important
to check with...

with your team just to see
if you might be eligible,

if you were required to work from home
more than 50% of the time.

(Steven) What's the biggest issue
people face

when it comes to preparing their taxes
or getting ready for their taxes

over the course of the year?

Is there one thing that always stands out
to you being a tax nerd and saying,

"I wish people would do this 
and it'd make it so much easier for them?"

(Bonnie) Most definitely. I think
it comes down to being organized.

I always advise folks
to have a filing system.

So that any medical expenses that come up

or any expense that they think
might be deductible

to just throw into a file folder
and label it "Tax year, 2021, 2022,"

and that way at tax time,

if they're working with an accountant
or they're doing it themselves,

it gives them an opportunity to see
if things are tax deductible.

And that way they have it handy
because it's difficult to remember

that, okay, that expense, you had
for maybe some dental work

that was not covered by your employer
is tax deductible

and you have no idea where you put it.

Maybe it's sitting in a purse
or a back pocket somewhere

and it's lost and it's a pretty
significant deduction for the most part

that can help to reduce
your tax liability.

So I would say being organized
and understanding that

December 31st is the end
of the fiscal year,

therefore, all the income sources
that are paid out in that year

is taxable in a year.

So have a conversation
with a CUSIP advisor

can certainly help you prepare in advance
for what that tax liability

is going to look like come April.

(Steven) What kind of tools are out there
to help the average person with taxes.

(Bonnie) Yeah, absolutely,
there's a lot of great tools,

You know, back in the day,

You used to do these things by hand.

In fact, that's how I learned
20 years ago.

But most software and in fact,
free software is very intuitive.

So if you look on CRA's website,

there's going to be a list
of free tax software

that's available to anyone.

And it's compatible
with CRA's electronic filing system.

So off the top of my head, Simple Tax,
TurboTax H&R, Block,

they all have free versions.

Mind you, a lot of those companies
are in the business to make money

so there's always upgrades available,

but you could
certainly start with the basic

and use that software for free,
all the functionality is the same.

Very intuitive, it asks you questions
about your scenario and asks you

if you have kids and did you have
any medical expenses, et cetera.

It guides you through that process,
so it's pretty straightforward.

Usually that software is offered
right in January.

So I do recommend people go
into the software and do a little bit

of a mock-up of their tax return

just to see if they have a balance owing
and that gives you opportunity

to understand if you have a balance owing,
maybe there's some opportunities

to reduce that tax liability
and that's where CUSIP can come in.

If you've got a tax liability of say 5,000
you can go and talk to CUSIP advisor

and maybe put in some money
into an RSP, it can help you determine

how much contribution you should make
to bring that balance down to zero

and is that the best option for you
based on your scenario.

(Steven) Bonnie, thank you so much
for this information.

(Bonnie) Absolutely, you're welcome,
Steven, anytime.

(Steven) Bonnie Naccarato
is a SISIP financial planner

and a self-proclaimed tax nerd
based in Kingston.

Contact your SISIP advisor today

at <i>sisip.com</i> to review your financial plan

and set yourself on the path
to financial health.